Sinking under huge debts and decades of mismanagement, Detroit formally filed for bankruptcy on Thursday, becoming the biggest US city ever to take such a drastic measure.

Kevyn Orr, Detroit's emergency manager, took the decision after failing to broker a deal between the city's bondholders and its pension funds.

The filing sets a new record for municipal bankruptcies and dwarfs the previous record filings by Jefferson County, Alabama, and Stockton, California. No other city of Detroit's size has ever gone bust.

Orr and the city's creditors and pensioners will now begin a fraught legal consultation period while a court determines whether the city is eligible for "chapter 9" bankruptcy protection for its $18.5bn debts and liabilities.

Orr set out a restructuring plan in June for the city, which has been plagued by corruption and plummeting revenues for years. But pension groups and bondholders balked at the terms. This week, pension funds objecting to Orr's plan sued to stop him from making the move.

Matt Fabian, the managing director of bond expert Municipal Market Advisors, said the filing had been widely anticipated. "Detroit's story has been terrible for 50 years. This is just the latest terrible thing to happen."

He said bankruptcy would allow Orr to renegotiate government contracts and other broad powers to impose draconian costs cuts. But he warned bankruptcy was not an easy path. "This will make it hard for the city to conduct day-to-day business. It will drain a lot of time, it could put people off moving businesses to Detroit and it could last for years," he said.

Other major cities have teetered on the edge of bankruptcy, including New York in 1975, Cleveland in 1978 and Philadelphia in 1991. But all brokered deals rather than face the dire consequences of going bust. "Detroit has severe difficulties, but this would be an extraordinary event," said James Spiotto, a chapter 9 expert and head of the bankruptcy unit at Chicago's Chapman & Cutler, before the bankruptcy was confirmed.

If the filing is approved, Detroit's cost of borrowing will soar and the city will struggle to raise cash, Spiotto warned. Meanwhile, officials would spend years battling in the court over who is owed what. "Chapter 9 is time-consuming, expensive and uncertain," Spiotto said.

Orr has said bankruptcy was not his preferred option. But as talks foundered, his options narrowed. His original plan was to slash benefits to retirees, including pensions and healthcare, and cut already minimal services to the bone. Police and firefighters who retire before age 55, for example, would get no healthcare under one proposal. Bondholders would have received cents for every dollar in debt they hold.

Municipal bonds have traditionally been viewed as among the safest available investments. When Central Falls in Rhode Island went bust in 2011, the state passed a law giving bondholders priority over other creditors, including retirees. Detroit's investors must now be wondering whether bankruptcy would give them a better deal.

Neither side was willing to sign up for Orr's settlement.

This week, the city's two pension boards – the General Retirement System and the Police and Fire Retirement System – sued Orr and Michigan governor Rick Snyder in an attempt to block a bankruptcy.

"It appears imminent the governor will grant the emergency manager the unconditional power to proceed under chapter 9, and the emergency manager will seek to have the city's pension debts impaired unless the retirement systems and their participants accept the emergency manager's unilateral imposition of significant impairments to their accrued financial benefits," the lawsuit says.

Orr was appointed in March after Snyder declared a "financial emergency" in Detroit. A lawyer and University of Michigan alumnus, Orr helped steer Chrysler out of bankruptcy, but this is a dilemma of an altogether greater magnitude.

Even after years of decline, Detroit remains the US's 18th most populous city. The city's finances may have hit an all-time low but its business is bouncing back. The car firms that made the city are back in rude health, and downtown Detroit is being revitalized by new businesses.

Some local business leaders believe that the city has already hit rock bottom, and that a stronger Detroit is already emerging. Dan Gilbert, founder of the Quicken Loans lender, has rebuilt downtown and encouraged new businesses and old to move into the city. In a recent interview with the Guardian he said he is "finally going to do what needed to be done if not in the last several years then in the past decades. It's essentially good news for the city because it means this period is coming to an end."

But for Detroit's poor, bankruptcy is likely to make life even harder in the short term. About 60% of Detroit's children live in poverty. Orr had planned to bus creditors to some of the city's poorest areas so they could see what was at stake. Armed security would have gone along for the ride.

"If they can see what it's like for Detroiters, what they endure every day in this city, I think they'll begin to understand what's at stake," Orr told the Detroit Free Press. The tour was canceled as bankers became worried about the PR impact of captains of finance touring the city's poorest neighbourhoods

you sure it didnt have anything to do with the automotive industry basically abondoning the city? Seems like that played a roll as well....

UM. Just why do you think the Auto Industry abandoned Detroit? 50+ years of Liberal Democrat Mob Rule.

July 23rd, 2013, 10:47 pm

wjb21ndtown

Re: Detroit files for bankruptcy

regularjoe12 wrote:

BillySims wrote:

50+ years of Democrat mob rule has destroyed a once proud city.

you sure it didnt have anything to do with the automotive industry basically abondoning the city? Seems like that played a roll as well....

Uhmmm NO!

Detroit has it's own special "income tax" that you HAVE to pay if you work down there. There hasn't been a massive influence of auto workers in Detroit for 30 years. For the most part, the auto industry moved to Auburn Hills, Flint, Pontiac, Sterling Heights, Ecorse, etc. long ago.

It was definitely 50 years of entitlement spending, corruption, lining of people's pockets, and an ignorant, stupid electorate that was largely in on it, corrupt itself, and raped that City dry... meaning.. without lube...

All Obama did was prolong the bankruptcy, complicate it, and allow Detroit to delve further into a hole. Detroit CHOSE to abandon common sense proposals that would have saved them tens of millions of dollars, because they're ignorant morons. Bankruptcy was the only option, and it's about damn time.

July 24th, 2013, 1:28 am

m2karateman

RIP Killer

Joined: October 20th, 2004, 4:16 pmPosts: 10408Location: Where ever I'm at now

Re: Detroit files for bankruptcy

wjb21ndtown wrote:

regularjoe12 wrote:

BillySims wrote:

50+ years of Democrat mob rule has destroyed a once proud city.

you sure it didnt have anything to do with the automotive industry basically abondoning the city? Seems like that played a roll as well....

Uhmmm NO!

Detroit has it's own special "income tax" that you HAVE to pay if you work down there. There hasn't been a massive influence of auto workers in Detroit for 30 years. For the most part, the auto industry moved to Auburn Hills, Flint, Pontiac, Sterling Heights, Ecorse, etc. long ago.

It was definitely 50 years of entitlement spending, corruption, lining of people's pockets, and an ignorant, stupid electorate that was largely in on it, corrupt itself, and raped that City dry... meaning.. without lube...

All Obama did was prolong the bankruptcy, complicate it, and allow Detroit to delve further into a hole. Detroit CHOSE to abandon common sense proposals that would have saved them tens of millions of dollars, because they're ignorant morons. Bankruptcy was the only option, and it's about damn time.

The automotive industry still has a strong presence in Detroit. GMs headquarters are still there. There are automotive plants in Detroit with workers paying those taxes. A reduced number of employees are there, I agree. But they ARE there.

What destroyed the city of Detroit over time is EXACTLY the same as what is destroying it today. Crime on the streets and crime in politics. Downtown was once an area where people would go shopping at a plethora of stores. Those stores closed because they were tired of dealing with the criminal element and the reduced number of customers. There was no reason to invest and stay there. Neighborhoods crumbling because the people living there refuse to take care of the property, and refuse to accept the fact that crime is running rampant around them. It was always easier to blame their problems on someone of a different skin color than it was to look at themselves and understand the issue was themselves. Coleman Young blamed 'white flight', but failed to recognize and mention that as the black population increased in percentage, crime increased exponentially. Somehow the people who moved away from the city were to blame for the problems within the city. Stupid lack of responsibility and accountability killed that city.

_________________I will not put on blinders when it comes to our QBs performances.

July 24th, 2013, 3:49 pm

wjb21ndtown

Re: Detroit files for bankruptcy

m2karateman wrote:

wjb21ndtown wrote:

regularjoe12 wrote:

BillySims wrote:

50+ years of Democrat mob rule has destroyed a once proud city.

you sure it didnt have anything to do with the automotive industry basically abondoning the city? Seems like that played a roll as well....

Uhmmm NO!

Detroit has it's own special "income tax" that you HAVE to pay if you work down there. There hasn't been a massive influence of auto workers in Detroit for 30 years. For the most part, the auto industry moved to Auburn Hills, Flint, Pontiac, Sterling Heights, Ecorse, etc. long ago.

It was definitely 50 years of entitlement spending, corruption, lining of people's pockets, and an ignorant, stupid electorate that was largely in on it, corrupt itself, and raped that City dry... meaning.. without lube...

All Obama did was prolong the bankruptcy, complicate it, and allow Detroit to delve further into a hole. Detroit CHOSE to abandon common sense proposals that would have saved them tens of millions of dollars, because they're ignorant morons. Bankruptcy was the only option, and it's about damn time.

The automotive industry still has a strong presence in Detroit. GMs headquarters are still there. There are automotive plants in Detroit with workers paying those taxes. A reduced number of employees are there, I agree. But they ARE there.

What destroyed the city of Detroit over time is EXACTLY the same as what is destroying it today. Crime on the streets and crime in politics. Downtown was once an area where people would go shopping at a plethora of stores. Those stores closed because they were tired of dealing with the criminal element and the reduced number of customers. There was no reason to invest and stay there. Neighborhoods crumbling because the people living there refuse to take care of the property, and refuse to accept the fact that crime is running rampant around them. It was always easier to blame their problems on someone of a different skin color than it was to look at themselves and understand the issue was themselves. Coleman Young blamed 'white flight', but failed to recognize and mention that as the black population increased in percentage, crime increased exponentially. Somehow the people who moved away from the city were to blame for the problems within the city. Stupid lack of responsibility and accountability killed that city.

I wouldn't say that the Automotive industry is "strong" within the City limits. "GM's head quarters" and I believe the ONE Chrysler plant are less than 10% of the auto work force that was down there even 15-20 years ago. Further, those plants generally receive tax abatements to stay down there, giving the City the perception of strength, while throwing away a large chunk of resources.

That said, I don't disagree that crime is a problem, but the bigger problem, by far, is corruption. I deal with case after case of businesses getting "picked on" by the City of Detroit, and case after case of people WANTING to help improve the City but are largely unable due to ridiculous laws like Prop 85 (which forces anyone working with the City of Detroit to be primarily minority owned or staffed). It's ridiculous. They get rid of contracts that would benefit the City and have corrupt politicians doing favors for their minority friends for kickbacks. They give jobs to their relatives, who don't show up for work, and keep numerous people on the payroll that don't belong. Add to that ridiculous union contracts and there you have it... BROKE...

WOW!... Didn't know this crap:

Quote:

“Nothing – nothing works in this city,” said Sheila Cockrel, who spent 16 years serving on Detroit City Council. Since stepping down in 2009, she has been teaching at Wayne State University. “It takes 58 minutes for a police car to come if they accept your call,” she added. “The only calls they accept are if there’s a gun and they believe you’re not lying when you say it. In my middle-income neighbourhood, we pay a private security service ... Once I was in my house at three o’clock in the afternoon and three young men tried to break in. The first call I made? Threat Management.”

Ms Cockrel is referring to Threat Management Centre, a private security company which operates from a black building near the Detroit River waterfront. It is among the many private firms that some residents have resorted to as the city struggles to provide adequate services. Founded in the mid-1990s by Dale Brown, known to his staff as “Commander Brown”, Threat Management’s client roster has 1,000 homes and 500 businesses.

Mr Brown’s men and women are kitted out in military-style trousers, black T-shirts, protective vests and badges. The “Commander”, who began by training locals to protect themselves before founding his company, drives around in a black Hummer 4x4. Threat Management Centre’s personnel are known as “Vipers”, an acronym, Mr Brown told The Independent, for “Violence Intervention Protective Emergency Response System”. Some, but not all, are armed, often at clients’ request, although the entire force will shift to non-lethal weaponry by the end of this year. Mr Brown said that when his team respond to calls from clients such as Ms Cockrel, they are under instructions to call the police, even though residents often don’t bother. “It is an organisation that is driven by the mission, not the money. If there was no money, would [we] still do this? Yes, there would just be less of us, less often,” he said, sitting in an office decorated with framed testimonials and photos of Vipers in action.

July 24th, 2013, 4:52 pm

Blueskies

QB Coach - Brian Callahan

Joined: September 13th, 2007, 12:43 pmPosts: 3121

Re: Detroit files for bankruptcy

Detroit's problems are many and varied. I think you could plausibly advance at least a dozen different arguments for the city's problems.

-Race relations-Suburban sprawl/historic lack of public transportation-Reliance on the auto industry-Political corruption-union mentality-rampant narcotic use

And I'm sure there are others I haven't' considered.

Nevertheless, Detroit isn't alone. There are several other cities in Michigan that are probably next (Flint, Pontiac, Allen Park, Ecorse, etc). And that's just Michigan. I wouldn't be surprised to see a wave of municipal bankruptcies over the next few years.

July 24th, 2013, 5:17 pm

WarEr4Christ

QB Coach - Brian Callahan

Joined: October 26th, 2005, 11:48 pmPosts: 3056Location: Elkhart, In.

Re: Detroit files for bankruptcy

wasn't there a report last year that Detroit has 40% illiteracy?

So in essence, it is a nanny city, where the population has grown accustomed to government support for their lifestyle, so personal responsibility is non-existent and as long as the government checks keep coming, and hud housing is availabe, what's the issue? But now that the cows are coming home, and the city is imploding under the weight of the many issues y'all are discussing.

Detroit is a prime example of /socialist/communist/liberal/progressive/Marxist policies not working. They've been running the city unopposed for 50 years now and you can see what has happened. Are they better off now with the Utopian, pie in the sky, sensitive, emotional rhetoric and propaganda than they were when common sense, truth, and basic facts led Detroit to prosperity? Obviously not.

Albert Einstein once said that insanity was doing the same thing over and over again and expecting different results. Well,the city of Detroit electing Democrats/liberals/communists/socialists/Marxists every year without question proves that they are truly insane.

As a result, I have ZERO sympathy for their plight. They elected what they deserved.

_________________

July 28th, 2013, 1:29 pm

Blueskies

QB Coach - Brian Callahan

Joined: September 13th, 2007, 12:43 pmPosts: 3121

Re: Detroit files for bankruptcy

Politicians alone do not account for Detroit's problems, because most major American cities are run by leftwing politicians. Of the 25 biggest cities in the US, only two of them have Republican mayors.

Moreover, I would say that elected officials are a reflection of the underlying society, not a cause of it.

I think if Detroit had pro-business/pro-free market politicians running the place for the last 50 years, thing would be a lot better. However, in order for that to have happened, the people living in Detroit would've had to have been a lot different.

I think that when you get down to the actual essence of the problem, it's really that all the talented, hardworking, intelligent people left the area either for the suburbs or to go to different parts of the country. This phenomenon continues to play out today, and there really isn't anything to draw people back to the area.

Take Tesla. I think it's an overhyped company with an overvalued stock. Regardless, the Model S is arguably the greatest, most innovative American car produced in decades. And where was it made? Silicon Valley.

Why's that? Because a guy like Elon Musk would never contemplate living in Detroit for even a split second.

July 28th, 2013, 5:02 pm

wjb21ndtown

Re: Detroit files for bankruptcy

Blueskies wrote:

Politicians alone do not account for Detroit's problems, because most major American cities are run by leftwing politicians. Of the 25 biggest cities in the US, only two of them have Republican mayors.

Moreover, I would say that elected officials are a reflection of the underlying society, not a cause of it.

I think if Detroit had pro-business/pro-free market politicians running the place for the last 50 years, thing would be a lot better. However, in order for that to have happened, the people living in Detroit would've had to have been a lot different.

I think that when you get down to the actual essence of the problem, it's really that all the talented, hardworking, intelligent people left the area either for the suburbs or to go to different parts of the country. This phenomenon continues to play out today, and there really isn't anything to draw people back to the area.

Take Tesla. I think it's an overhyped company with an overvalued stock. Regardless, the Model S is arguably the greatest, most innovative American car produced in decades. And where was it made? Silicon Valley.

Why's that? Because a guy like Elon Musk would never contemplate living in Detroit for even a split second.

I disagree that there's a lack of incentive or lack of desire for people to move back to Detroit. The problem is... You can't. They have ridiculous ACR or certificate of occupancy inspections, their business inspections are a joke... Their approach to new citizens and business owners is that of "you (the citizen/owner) owe us (the City) something"... Not "we're grateful to have you, thank you for improving our City that is currently in shambles..."

July 28th, 2013, 5:43 pm

Blueskies

QB Coach - Brian Callahan

Joined: September 13th, 2007, 12:43 pmPosts: 3121

Re: Detroit files for bankruptcy

Quote:

I disagree that there's a lack of incentive or lack of desire for people to move back to Detroit.

Really? Who do you know that wants to move to Detroit? I know some people in their mid 20s who have moved there because of Quicken Loans, but I'm sure they'll move back as soon as they start a family (assuming they don't want their children to go to garbage schools).

July 28th, 2013, 7:43 pm

wjb21ndtown

Re: Detroit files for bankruptcy

Blueskies wrote:

Quote:

I disagree that there's a lack of incentive or lack of desire for people to move back to Detroit.

Really? Who do you know that wants to move to Detroit? I know some people in their mid 20s who have moved there because of Quicken Loans, but I'm sure they'll move back as soon as they start a family (assuming they don't want their children to go to garbage schools).

I'm a real estate broker. I know tons of people that want to move to the City, but the City's policies turn them away. I literally had a case a few months ago where a couple purchased a home at auction through the City of Detroit, but the Michigan Land Bank tore it down two weeks after they bought it. I have the pics on my laptop... If posting them were easier I'd throw them up here. The effed up thing is... This was one house, complete and intact, with a new roof and nice interior. There are 1,000s of houses down there that are all jacked up, but they chose to tear down this house for whatever reason.